18 Fair Trade Pros and Cons

Jun 9, 2015

Fair Trade is a model of importing goods that have been created by workers who are earning real livable wages for what they are doing. Instead of taking advantage of the free market system to pay workers in the undeveloped world next to nothing, producers agree to meet specific wage and production standards in return for certain import concessions.

The overall concept of Fair Trade seems very positive upon first glance. Digging deeper, there are some disadvantages to the Fair Trade system that must also be evaluated. Here is a look at some of the key points to consider when looking at imports within this production system.

What Are the Pros of Fair Trade?

1. There is an excellent wage system in place.
Living wages are more than just a few cents per hour when involved with the Fair Trade model. Many cooperatives offer remarkably higher wages for workers than what the general market supports on a local basis. Many cooperatives also make investments within local communities to support their workers, including modern medical care, schooling options, and the teaching of sustainable food growing practices.

2. Community benefits extend to more than just basic needs.
Comforts are also provided by the Fair Trade model by cooperatives and providers. Many workers are able to work in conditions that exceed local standards and worker safety is often a top priority. Dangerous chemicals and other substances are not allowed by the production model, which helps to protect families as they work and grow up.

3. Discrimination is not allowed.
Workers in a Fair Trade cooperative are free from discrimination. This allows for equal job opportunities that may not always be available to local workers. The two points of emphasis are gender and religious discrimination. That’s why many workers in cooperatives tend to be women as they can earn triple the wages through Fair Trade [or more] when compared to wages earned through a more conventional means.

4. Child labor can be reduced.
Children are very much a commodity in the undeveloped world. Many children work long hours without any form of payment – or if they do earn money, it is a fraction of what is actually deserved. Fair Trade practices help to eliminate the need for child labor because workers earn fair wages and that lessens the need of families to make their children work to help support the household. This means children can receive an actual education instead.

5. Social conditions can dramatically improve.
With over 20 years of Fair Trade cooperatives operating in some areas, there has been a dramatic improvement in the social conditions that small villages and communities have experienced. Better business education has led to higher levels of profitability while safety and health improvements have been made simultaneously. Farming practices have become more efficient, creating higher yields with less effort. In return, a higher standard of living has been achieved.

6. It allows small business owners to become internationally competitive.
Small cooperatives and business owners who become certified as Fair Trade can become instantly competitive with large businesses on the international stage. This means large scale buyers are unable to exploit workers or force competitive cooperatives out of business because pricing and distribution is handled equally when products are imported.

7. Organic techniques are often used to create Fair Trade products.
In the developed world, the conversation has evolved into the pros and cons of eating GMO foods. In the Fair Trade world, there is no debate. Organic techniques are used almost 100% of the time, creating a sustainable growing pattern that the environment is able to support year after year.

8. Producers are assured a minimum price no matter what happens.
Once Fair Trade certification has happened, the cooperatives and producers are guaranteed a specific return for the goods that they are producing. The minimum price can never fall before market level, which is why so many invest into local communities. Community investments drive up market prices, ensuring that a better margin can be achieved on the goods being produced.

9. Multiple products are available.
From fresh water prawns to precious metals, the Fair Trade model is growing to encompass most goods that are produced in the world today.

What Are the Cons of Fair Trade?

1. There are natural limits to the success that can be achieved.
Fair trade cooperatives can do a lot of good for a community, but ultimately their success is naturally limited to the local population centers where workers are. This can create divides within a community because some workers may not qualify to be part of the cooperative and may not receive the many benefits that coop workers are able to receive.

2. There are very high fees associated with this model.
In order for an organization, an individual, or a cooperative to become certified as Fair Trade, they must undergo a costly and rigorous examination period. There joining fees that must be paid if accepted and there are annual fees that must be paid to maintain that certification. The cost can be upwards of several thousand dollars, which can put the price of Fair Trade membership out of reach for local entrepreneurs who are trying to change their communities.

3. There is a limited customer base around the world.
Because the fees are high and because workers earn competitive rates, Fair Trade products have a premium price associated with them when compared to “regular” products that fall outside of this type of market. The higher prices weigh on consumers who are living paycheck to paycheck, usually causing them to choose a cheaper product of similar quality.

4. The amount of product choice is greatly reduced.
There are two primary products people purchase when it comes to Fair Trade goods: chocolate and coffee. Although there are numerous other goods that are available for sale, these niche products don’t have a very large market. This means that eventually there won’t be demand for what is being created and this could endanger jobs and even the existence of the cooperative itself. It becomes a guessing game for survival and even the best educated guesses can often be wrong.

5. Administration costs don’t go to the suppliers.
Fair Trade costs are partially so high because there are higher administration costs at the retail level that occur. These additional costs aren’t passed along to the cooperatives or the workers. They stick around the local community and pad the financial bottom lines of businesses who are selling the Fair Trade goods. That means worker exploitation is still occurring, but in a white collar way instead of a blue collar way.

6. There is little accountability enforced on producers.
Efforts have been made to cut down on abusive labor practices, but slavery and child labor still help to fund Fair Trade products after the certification period elapses. There is no real way to make sure these bothersome components of trade do not exist because there is no authoritative central authority in place. This means the only way to hold producers accountable is to refuse to represent their products. Since that means less money for everyone, a blind eye to the practice becomes the norm.

7. Big buyers aren’t generally attracted to the Fair Trade model.
The biggest buyers of products in the world today are looking at the overall cost of their inventory purchase. If factory farming and assembly line production can create goods that are of a similar quality for a price that is 20-30% lower, then the big buyers will purchase the cheaper product. This makes it difficult for Fair Trade suppliers to get a real foot in the door and ultimately that harms the environment as well because profitable practices instead of sustainable practices are implemented.

8. The standards of community development have lapsed over the years.
Not only has the Fair Trade model been accused of manipulating and distorting the global economy, but some of the poorest workers and farmers are completely priced out of the system. This means the Fair Trade model may be driving certain workers out of business so it can support itself, which is contrary to why this model was started in the first place.

9. There is no drive to create better efficiencies.
If there is a guaranteed minimum price, then there is no real motivation to improve the efficiencies of production processes. Ultimately this means the consumer is paying more for something without just cause.

The Fair Trade pros and cons show that we need to make sure unethical practices no longer stay out of sight. Instead of putting an emphasis on cheap goods and services, we should be placing a point of emphasis on the working conditions of those who are producing what we are using. Far too often cheap prices exploit these workers. Fair Trade practices may not be perfect, but they do help to stop the practice of free market exploitation.

After being physically and mentally disabled by a brain tumor, Brandon overcame the odds to regain his health to help his pregnant wife in her fight against stage 3 breast cancer. A couple of years later he launched his blog. Today over 1 million business owners read his blog every month. Read Brandon's inspirational comeback story here.